Six tips for starting a budget

The B-word – "budget" – can be daunting. But starting a budget need not be difficult.

1. Try a traditional approach: A traditional budgeting approach involves tracking fixed and variable expenses. Subtract the total expenses from income and decide how to save and invest the remainder. Expenses are adjusted as needed and monitored and updated regularly to take changing circumstances into account.

2. Use technology: Online banking and personal finance software may help cut down the time it takes to categorise spending into shelter, utilities and other outgoings. Log-on to bank accounts regularly to watch saving and investment progress and stay motivated. Play around with online calculators to see, for example, the effect in 20 years of increasing savings by 1% of income now.

3. Consider a "reverse budget": Tracking spending does not always have to be part of budgeting. An alternative is to use a "reverse budget" and put aside a set proportion of income – say, 30% – for savings and investments then spend the rest. Some argue this approach is quicker and more forward looking than tracking spending that occurred in the past.

4. Pay yourself first: Saving doesn't have to be something addressed at the end of the month just before the money runs out. Incorporate savings into your overall budgeting process and create a habit that means saving happens naturally as a priority at the start of your income cycle.

5. Talk about it: If you are in a long term relationship, plan your budget with your partner. This may avoid duplicating costs and prevent unexpected bills.

6. Don't delay: The earlier you start, the sooner you'll see benefits from getting personal finances in order. Interest rates will start working for savers (or stop working against borrowers with high interest debts).

eZonomics team.(JavaScript must be enabled to view this email address)